NCUI Chairman Dileepbhai Sanghani hailed the decision of the Reserve Bank of India regarding the revision of home loans for the individual borrowers of Urban Cooperative Banks (UCBs), State Cooperative Banks, and District Central Cooperative Banks.
“The long-standing demand of the cooperative banking sector has been fulfilled. For more than one decade the cooperative sector has been demanding the revision in home loan limit and on several occasions, NCUI also wrote letters in this regard”, Sanghani added.
He further added It will help the cooperative banks to increase their loan portfolio. With the creation of a new Ministry of Cooperation by Prime Minister Narendra Modi, the cooperation has been a central subject, Sanghani underlined who is also the Chairman of Amreli District Central Cooperative Bank.
It bears recall that for Tier-I UCBs the previous limit was Rs 30 lakh which has now been revised to Rs 60 lakh. Similarly, for Tier-II UCBs the limit has been increased from Rs 70 lakh to Rs 1.4 crore.
Jyotindra Mehta, President, Nafcub said RBI has accepted the longstanding demand of the sector and has announced the enhancement of housing loan limits to be sanctioned by tier and tier-II UCBs.
It was the sustained efforts of NAFCUB and the keen interest evinced by the Ministry of Cooperation headed by Shri Amitbhai Shah in the issues of the sector that has helped the Regulator agree to the enhancement, Mehta felt.
He further said “This along with many other issues have been raised by stakeholders
from time to time and we are optimistic that RBI will consider all the requests favorably to facilitate strengthening and help in faster growth of the sector.
UCBS will be able to increase the advances to the middle-class population and in turn, increase their profit through secured portfolios like housing finance.
Mehta also release Bullet points for thanking RBI
- By enhancing the advance limit of housing finance the UCBs will be able to increase their secured advance portfolio.
- UCBS will be making more profit.
- UCBs will be able to increase their CD ratios.
- Doorstep banking will strengthen the client base of the UCB sector.
- The first time RBI has started thinking to give parity to the UCB sector with all other banking entities.
- Clients of the UCB sector (small and middle-class population) will benefit from increased limits available to them.
Satish Marathe, Founder Member Sahakar Bharati called it a welcome move, long-awaited by the CoOp Sector. In the future, RBI should review the revision of such limits at least every 3 years, he underscored.
While the increase will benefit the home buyers, the maximum Housing Loan to Individuals by a CoOp Bank should have been linked as a certain percentage of its Tier 1 Capital. Such linking was desirable from the perspective of Risk Management.
Marathe further said unfortunately, the portfolio of Housing Loans to Individuals is still being classified under
Commercial Real Estate (CRE). This classification needs to be reviewed by the RBI.
Similarly, the total portfolio of Housing Loan to Individuals needs to be classified under Priority Sector Lending (PSL). Present limits are too low. I Hope, RBI also revises the limit, said Marathe
Marathe said permitting STCCBs & DCCBs to extend enhanced Housing Loans to individuals is welcome. However, for STCCBs & DCCBs to be effective instruments of economic development in rural India, keeping in mind the changed income pattern, the need is for New Business Models for these Banks.
